This is why, guys. Move, move. He had become a celebrity. There is no question. One of the richest people on the planet, and certainly one of the youngest rich people on the planet. He was on the cover of Fortune this year, being compared to Warren Buffett. 30-year-old billionaire Sam Bankman-Fried, better known as SBF, saw a meteoric rise as crypto’s golden boy.
The more time I spent with Sam, the smarter I felt that he was. My goal is to be able to donate almost everything that I made. A seemingly altruistic billionaire looking to have a big impact. I don’t give a shit about my legacy. Like, I care about the impact that I have. He struck me as somebody that was really trying to do something transformative.
Which is why the crypto scandal that engulfed him shocked the world. News overnight, Sam Bankman-Fried is now in custody in the Bahamas. His $32 billion cryptocurrency exchange, FTX, goes bankrupt in a matter of days. $8.9 billion in customer funds are missing. I thought he was the Mark Zuckerberg of crypto.
Is he now the Bernie Madoff of crypto? Top minds on Wall Street, Silicon Valley venture capitalists, A-list celebrities, and millions of crypto traders flocked to FTX, trusting Bankmit Freed with their money. I lost over $2 million on the FTX platform when it went down. Now FTX customers who lost millions are sharing their stories. It’s really, really sad.
Really sad. Not only how it’s affected me, but how it’s affected millions of people globally. Investors who gave FTX tens of millions in capital are speaking out. So you feel betrayed? Oh, a thousand percent. I’m betrayed and disappointed. And the former president of FTX US, who resigned less than two months before its collapse, tells All.
What Sam did was old-fashioned financial fraud. So far, all anyone has from Bankman-Fried is an apology. I’m deeply sorry about what happened. And customers want answers. I’d never lost that much money in that amount of time before. This was probably one of the most scariest times, like, ever. I am definitely pissed at SPF.
This was an entrepreneur who could have done really great things. How did it all go so spectacularly wrong? I’m not going to revise history. I liked him and trusted him. How could so many have been fooled? With an entity like FTX, there were clearly glaring red flags beyond any that I’d ever seen before.
And will his customers ever get their money back? I’m in quite a big hole right now. I’m probably going to have to file for bankruptcy. A stone’s throw from the turquoise water and pristine beaches in the Bahamas, Sam Bankman-Fried sets up FTX headquarters in Nassau. What was the actual headquarters like? They had three or four what effectively looked like suburban office buildings that they were conjoining.
It looked like a very large trading floor, similar to what you would see on Wall Street. In less than two years, this little office park in the Bahamas becomes home to one of the largest cryptocurrency exchanges in the world, built by traders for traders. The platform worked. It was probably the best platform out there in terms of user experience.
More than 5 million users flocked to the exchange, according to FTX, and they were trading big money. We have 10, $15 billion of daily trading volume on the platform. From Wall Street to Silicon Valley, some of the smartest money becomes desperate to get in on the action. He was a industry leader and a first mover in cryptocurrency exchanges, had a big vision for the future, and he was minting money.
Investments in FTX pour in, totaling nearly two billion dollars. I think their impression was Sam was the ideal tech founder who had landed on a gold mine. He had this way of making everyone really want him to succeed. He was this person who was incredibly smart, he was ambitious. He was well pedigreed.
He had gone to MIT, his parents were Stanford University professors, he had worked at Jane Street, an organization that everybody on Wall Street respects. And so that combination of things is a pretty interesting thing. For retail trader Sunil Kavuri, who’s worked in traditional finance at Morgan Stanley and J.P. Morgan, hearing about these investments gave FTX major street cred.
They raised, yeah, significant amount of funds, about $900 million from Sequoia, Paradigm. I thought, OK, this is a very safe, institutionally backed exchange. Kivori moves millions to the exchange. Crypto enthusiast Evan Luthra does the same. 100 percent. I was aware about all the VCs that I invested in FTX, and that is also building a lot of trust. Seemingly out of nowhere, Bankman that I invested in FTX and that is also building a lot of trust.
Seemingly out of nowhere, Bankman Freed and FTX start becoming the biggest names in crypto. This is a tale as old as time to some degree. Some young charismatic guy in Bermuda shorts with the floppy hair charmed the 20 best investors in the world. The young billionaire crypto titan’s overnight success featured in magazines and on TV.
Thanks for having me. In the otherwise secretive world of crypto, where the owners of exchanges are camera shy, Bankman-Fried stands out, welcoming the publicity. I would say it definitely played a little bit of a role that we knew who was actually behind FTX. I think what really gave him credibility was the exponential profits he was making for the investors and the billions of dollars he was throwing around like monopoly money.
The co-founder of FTX is spending millions promoting the exchange with high-profile celebrity endorsement deals to bring in more and more customers. It became an obsession. More sports teams, more sports celebrities, you know, different kinds of properties that we could put our name on. NFL superstar Tom Brady becomes an investor and is featured in FTX commercials.
FTX is the safest and easiest way to buy and sell crypto. Comedian Larry David stars in a Super Bowl ad that cost millions. FTX is a safe and easy way to get into crypto. Eh, I don’t think so. The marketing works. For FTX, the first time I heard about it was on the Super Bowl ads. I was like, oh my goodness, there’s all these big-name people utilizing FTX.
All the A-list names associated with FTX gives customers the impression there’s been ample due diligence done on the exchange. Did the celebrities make me feel more comfortable about using FTX? Personally, it did. But in reality, everyone involved is gambling on the success of FTX and placing their trust in its founder.
Remember, when you’re talking about a venture capitalist, you’re talking about a risk taker with capital. You’re going to go one for 10. You’re going to go one for 15. And in that one, you may find the Google or the Facebook. And so Sam was one of those one for 15 or one for 20. But customers placing their faith in the exchange have much more to lose.
The money was meant to be used for buying a house. I don’t have that anymore. I own this condo. I’ve owned it for six years. I don’t wanna just have to part with it. And in November of 2022, the entire operation unravels in just a few days. The implosion of FTX begins in the suburbs of Chicago. Nick Baker, the editor-in-chief at Coindesk, a crypto news website, is working from home when one of his reporters reaches out with a story.
Ian Allison, our reporter, started hearing Alameda, this trading firm owned by Sam Bankman-Fried, may not be on the most solid financial footing. Ian heard this from a source. As a journalist, you hear a tip, and that’s great, but the challenge is, well, then how do you prove that? They confirmed the tip with a leaked copy of Alameda’s balance sheet.
What the document showed was that in a very powerful way, that there was a very strong financial entanglement between these two companies. Their article goes live on November 2nd, exposing for the first time that nearly half of the $14.6 billion in assets on the balance sheet of Bankman-Fried’s secretive crypto hedge fund were listed as FTT tokens, a digital currency Bankman-Fried and his co-founders created for FTX customers back in 2019.
Bankman-Fried and his co-founders created for FTX customers back in 2019. That’s a red flag potentially because it tells you that so much of this empire is supported on a foundation of money that comes from a sibling company. To better understand why that revelation leads to the collapse of FTX, you need some background on FTT.
The FTT token is basically the token for the platform FTX. The benefits you get from the FTT token is you get reduction in trading fees. I invested about $200,000 in the FTT token. SPF would regularly show that he was personally buying FTT token, so I held it. When FTT first hits the market in July of 2019, a token costs around two bucks.
By 2021, it’s skyrocketed to nearly $80. And in November of 2022, it’s trading around $22. The idea was to give people almost like an equity-like stake in FTX.com if you were someone outside the US. But Harrison and FTX customers say they didn’t know the FTT token was not widely distributed, which is key to having the market determine its price.
A substantial portion of all the FTT tokens in existence were sitting on the balance sheet of Alameda. According to the criminal complaint, SBF engineered the price of FTT by directing Alameda to buy large amounts of the token to maintain its price. And that creates a huge problem. Alameda could not have sold its billions of dollars of FTT tokens without crashing its price.
Their presence there, there’s such a substantial presence on that balance sheet, was a suggestion that perhaps this is a house of cards. was a suggestion that perhaps this is a house of cards. To make matters worse, Alameda began using it as collateral to obtain billions of dollars in loans from third-party lenders, leaving Alameda exposed to significant financial risks, according to the complaint.
And by the summer of 2022, several of Alameda’s major lenders go bankrupt after a $2 trillion crash in the crypto markets. It was probably an opportunity for Sam to say, wow, I just got smoked out alongside of Terra Luna and Celsius and Three Arrows. I’m shutting down Alameda and I’m going to focus all my energy on FTX.
I think if he had done that, I don’t think we’d be in this situation. Instead, at the direction of Bankman Freed, Alameda greatly increased its usage of FTX customer funds to meet its external debt obligations, according to the CFTC. FTX customers are completely in the dark about what’s happening with their money.
Their first indication there could be problems at FTX happens on November 6th, four days after the Coindesk article reveals the billions of dollars worth of FTT tokens on Alameda’s balance sheet, one of FTX’s biggest investors gets spooked. The CEO of Binance, the world’s largest cryptocurrency exchange who goes by his initials CZ, makes an announcement in a tweet to his 7 million followers saying, we have decided to liquidate any remaining FTT on our books.
And recently with the news of them becoming insolvent carried by CoinDesk first, we just said, well, we want to sell those tokens. That’s that’s all we did. The single tweet from CZ is enough to make some customers panic. A lot of market participants were getting spooked and were withdrawing the money.
were getting spooked and were withdrawing the money. We’re seeing a run on the bank start, and that was leading to, you know, $4 billion a day of client withdrawals. At that point, you know, we started calling prospective, you know, sources of financing because I was nervous. But publicly, Bankman-Fried is telling customers a different story.
On November 7th, he tweets, A competitor is trying to go after us with false rumors. FTX is fine. Assets are fine. SBF came on Twitter and then he said, a competitor is attacking us. We do not take client deposits and we don’t invest them in anything, even treasuries. So I think that put my mind at rest that, OK, this is just fear on the part of market participants.
So Sunil Kavuri, Jake Thacker and Evan Luthra keep their crypto on FTX. I did not think this was actually a cause of concern because I had all that faith and trust in the system and already built it up over time. But the very next day, Bankman Free deletes that tweet, according to the SEC. The price of FTT drops more than 75%, and it’s now apparent that Sam’s empire is crumbling.
And investors like Anthony Scaramucci are concerned. I went to the Bahamas on November the 8th. I flew down there. Sam seems sort of disassociated like the scene in Private Ryan where you know the battle’s happening and somebody loses his arm and they’re actually holding their own arm in their hands.
He was having a hard time processing that all this was happening to him as quickly as it was happening. I left the Bahamas saying, okay, there’s a huge problem here. In a last ditch effort to save the company, Bankman Freed makes a surprising move, calling the CEO of Binance with an offer to sell them FTX. But the deal never gets off the ground. Patrick Hillman, Binance’s chief strategy officer at the time, got a firsthand look at FTX’s finances as part of its due diligence team.
It was like a bomb went off in that place. We’re getting on calls. People are crying. Even though we were within the first like 12 hours of this crisis for them. So it was complete pandemonium over there. What did Binance end up finding in the due diligence process? We weren’t able to do due diligence for that long.
You asked for specific information, figures. The most basic figure is how much cash do you have on reserves and what are your liabilities, right? How much do you owe versus what you have today? And we couldn’t make heads or tails of it. The potential deal with Binance falls apart in less than 48 hours.
I’m thinking to myself, Binance pulled out. This is something very serious. When CZ and Binance basically said, we’re not doing the deal, that’s when I was like, uh-oh, now I got to do whatever I can do to get whatever I got left. This was probably one of the most scariest times, like, ever. And for many customers, it’s too late to withdraw their funds.
I requested all withdrawals of all my assets, but none of them completed. None of the withdrawals ever came through. It’s just helpless. Like, what do I do? I was just in so much shock that that could happen. I had a huge amount of money, obviously, on the exchange. And I thought, OK, there’s something wrong.
How can, why would he stop withdrawals? Because exchanges, if everyone takes the money out, all that’s what should be left is the exchange assets. I thought this was seriously wrong. I felt really sick. It’s clear FTX and Alameda cannot survive. And on the morning of November 9th, around 10 a.m.
at an all-hands meeting, Caroline Ellison, the CEO of Alameda, tells staff, earlier that year in response to an accounting or bookkeeping problem, Bankman-Fried and other individuals decided to use FTX customer funds for Alameda, according to the CFTC’s complaint. FTX and Alameda filed for bankruptcy two days later. It’s basically bloody November.
It’s basically bloody November. Bankman-Fried spends the next month in the Bahamas, inside the $30 million Oceanfront penthouse where he lived with other FTX and Alameda executives. It’s one of more than 30 properties purchased by the FTX group, according to the bankruptcy team.
Many people actually just sort of worked from this place where Sam lived and spent only sort of sporadic time in the office. It was sort of like a dorm. You know, it was like a college campus that they had created for themselves. I traveled to the Bahamas shortly after the collapse to ask Bankben-Fried how this happened. My first stop, FTX headquarters. Do you know if anyone from FTX is in there? No one’s there.
Just three months before the collapse of FTX, I interviewed Bankman Freed at the company’s headquarters. At the time, he was a frequent guest on CNBC. Sam, it’s great to have you back. The founder and CEO of FTX. Being featured on the cover of magazines and making headlines for bailing out other struggling crypto companies.
When I asked about the surprising resilience of his businesses during a major crypto crash, his answer seemed plausible. How did you and your companies, FCX and Alameda, survive that crash? I mean, I think like, first of all, FCX, just like our corporate treasury is in cash. I mean, our business is obviously incredibly like related to the crypto markets.
But, you know, we we kept cash on hand and it’s, you know, not meant to be something that has direct market exposure. I also asked BankBinfreed to explain the ties between his two companies. What about the relationship between FTX and Alameda? I think there’s some questions on kind of where those lines are.
Are there any potential conflicts of interest in running as many companies as you do in the same space? Yeah, I’ve put a lot of work over the last few years into trying to eliminate conflicts of interest there. And one big piece of this is just like, I don’t run Alameda anymore, I don’t work for it.
None of FTX does, you know, separate staffs. And the way that we view FTX is as a neutral piece of market infrastructure. During the two hour interview, he talked about giving money away to charity. My goal is to, you know, put myself in a position where I’ll be able to donate almost everything that I make.
And appeared to be an idealistic young billionaire. If you spend $300 million buying a yacht, like, that’s thousands of lives that you probably could have saved in sub-Saharan Africa. Like most reporters, at that time, I took Bankman Freed at his word. FTX and Alameda were private companies that didn’t have to disclose their financials in the same way a publicly traded company would.
But that interview didn’t age well. And a few months later, I found myself back at FTX headquarters, this time covering the story of how the guy who made billions over five years lost it all in a matter of days. I’m here to give Sam a chance to set the record straight. FTX’s headquarters here in Nassau, Bahamas is looking a lot different than when we were here just a few months ago.
There was a massive FTX sign out here, that’s gone. The parking lot is essentially empty right now and Sam Bankman-Fried, who was pretty camera friendly, has become pretty camera shy. I pushed for an interview and after lots of texts back and forth. Okay, well, we just heard from Sam.
Bankman-Fried invites me to meet with him behind these walls and security cameras at Albany, but declines to go on camera. I shared part of our conversation on CNBC. Despite being ousted from FTX in the company’s bankruptcy, he says he’s still spending most of his time still trying to broker a bailout. A few weeks later in an interview with CNBC’s Andrew Ross Sorkin for the New York Times deal book, Bankman Freed admits he would have done things differently.
I made a lot of mistakes or things I would give anything to be able to do over again. I didn’t ever try to commit fraud on anyone. But FTX customers who watched aren’t buying it. I have no respect for the person at this point, like zero. And anything that that person says is invalidated, in my opinion. I think that’s just bullshit and media narrative.
Like he’s trying to frame the media narrative to benefit him. So that part really pisses me off. I could see literally I knew that he was lying. He thought he could spin this story. Less than two weeks later as the sun sets in Nassau on December 12th the Royal Bahamas police arrive at Albany.
Police pull the former billionaire from the comfort of his penthouse and lock him up in this Bahamian prison. It’s a hellish week for the former crypto titan, who follows a strict vegan diet. He reportedly survived on peanut butter and stale Wonder Bread. But for those impacted the most, BankBitfreid’s arrest still doesn’t feel like justice. SPF going to prison doesn’t help me.
I’m not getting up and, you know, popping bottles of champagne in the morning and having mimosas with my dog over SPF going to prison doesn’t help me. I’m not getting up and popping bottles of champagne in the morning and having mimosas with my dog over SPF getting arrested right then and there. I still feel battered and bruised and completely demoralized.
Billions of dollars are still not back in FTX customers’ hands, and they want Bankman-Fried to pay. I think he should spend the rest of his life in jail. Literally 100 percent. It’s probably an easy way out relative to the suffering he has caused a lot of other victims. Extradited to New York in handcuffs, Bankman-Fried is now facing a dozen federal charges in Manhattan court related to the collapse of FTX and Alameda. From 2019 until earlier this year, Bankman Freed and his co-conspirators stole billions of
dollars from FTX customers. In some ways, it’s very, very straightforward what’s being alleged, which is that Sam Bankman Freed took digital assets or other forms of assets from FTX, moved them over to Alameda where he could have more control over them and use that money as his own private piggy bank.
John Ray, the former chief restructuring officer for the Enron scandal, appointed as FTX’s new CEO, is at the helm of a massive team tasked with following the money. This is really old-fashioned embezzlement. This is really old fashioned embezzlement. This is just taking money from customers and using it for your own purpose. What Ray discovered after his first look at the books is shocking.
There’s no record keeping whatsoever. It’s the absence of record keeping. Employees would communicate, you know, invoicing and expenses on Slack. They use QuickBooks, the multi-billion dollar company using QuickBooks. There’s no independent board. We had one person really controlling this. How did so many people miss what on the surface appears to be so many obvious red flags? What did due diligence look like on the investor side? You went through a standard checklist of due diligence, questionnaire, background checks, data room, accounting, financial analysis,
audited accounting. He had everything. I mean, you don’t dupe 25 of the world’s most sophisticated venture capitalists if you’re not going through the list, you know. So he had all the paperwork that any high-profile, experienced investor would really look to. Yes, he did. There was no smoke in any quarter of the business.
Brett Harrison was running the U.S. side of FTX from Chicago. What was your sense of the financial health of FTX when he left? I had no reason to suspect that FTX wasn’t anything other than extremely profitable and in great shape. You know, Sam was embarking on fundraising again. He had said both on some internal all-hands and externally that FTX.
com had $2 billion in excess capital as a result of its raises and FTX.US had $600 or $700 million, and they were in amazing shape. You think FTX is going to eat the world because it’s so profitable. So some of the top employees at the time of FTX really didn’t have a sense of the actual financial health of the company.
I can only speak for the people on the US side. We had absolutely no clue. How is that possible? Look, imagine yourself in our position. You are in a high-ranking position, but you’re not the CEO. Do you think, okay, Sam has made all this public and private reporting about the financials of the company.
I should really get all of the bank statements. I should get access to all of those, and I should rummage through them and see if I agree with the accounting. Sam testified in front of Congress. He’s getting, you know, public accolades from the top investment firms. Should I also distrust everything he’s saying in those two forums? I think anyone in our position would be hard-pressed to think, OK, this is the time where I’m supposed to suspect something is wrong at the company.
Whether or not you can understand how some of the red flags go unnoticed, it is clear that many feel duped. Their explanation for how they think Bankman Freed could have pulled this off. You know, good financial services organizations have lots of checks and balances around because there will always be a person of conscience that will protect the organization from a group of fraudsters.
And so he had a very close knit group of people that he’s working with. I would have to think that his closest inner circle of the people in the Bahamas that at least the other founders had to know. On the evening of December 21st, a convoy of SUVs transporting Sam Bankman-Fried arrives at a private jet hangar in Nassau.
And as soon as the private jet is in the air flying Bankman-Fried to New York to face criminal charges, the Department of Justice holds an unexpected press conference. expected press conference. The Southern District of New York has filed charges against Caroline Ellison, the former CEO of Alameda Research, and Gary Wong, a co-founder of FTX.
Both Ms. Ellison and Mr. Wong have pled guilty to those charges, and they are both cooperating. Gary Wong, the 29-year-old mysterious co-founder of FTX, flipped on Bankman-Fried. In court testimony, Wong said, “‘I was directed to and agreed to make certain changes “‘to the platform’s code. “‘I executed those changes, “‘which I knew would give Alameda Research “‘special privileges on the FTX platform.
‘” The coding guru testifies he knew what he was doing was illegal. Gary was someone who was very difficult to get to talk. At FTX, when I would go and occasionally try to visit the office in Bahamas. Gary was someone who never spoke to anyone. He would show up at 5 p.m. and leave at 4 a.m.. 27-year-old Neshad Singh, FTX’s director of engineering, also pleads guilty to fraud charges.
Brett Harrison says he raised concerns about Gary and Nishad in a letter to Bankman Freed just before he left the company. Gary Wong, the CTO of both FTX and FTX US, and Nishad Singh, the director of engineering of both FTX and FTX US, had written 90 plus percent of all the code for the exchanges.
And they did very little, I thought, to really disseminate the knowledge such that if either one of them suddenly, you know, ended up in the hospital and couldn’t come to work anymore, I think the exchange would have been done. It would have been over because all of the knowledge was in those two guys’ heads. Caroline Ellison, the 28-year-old CEO of Alameda Research, also shares what she knows, telling the court, I understood that FTX would need to use customer funds to finance its loans to Alameda, and that most FTX customers did not expect that FTX would lend out their digital asset holdings and fiat currency deposits.
We don’t really do any technical analysis. fiat currency deposits. We don’t really do any technical analysis. In this bizarre interview with the El Memento podcast, less than six months before Alameda’s meltdown, Ellison makes some surprising admissions about running the crypto hedge fund. I use very little math, use a lot of like elementary school math.
We tend not to have things like stop losses. Later, Ryan Salem, the former head of FTX Digital Markets, pled guilty to two criminal counts related to the FTX case. Guilty pleas from SBF’s top lieutenants gives investigators valuable information for their case against him.
And one expert says all that intel from the criminal case could also help the bankruptcy team track down customers and investors missing money. If there’s a fraud and there are a number of agencies involved in doing investigations, then you’re going to spend a lot of time with the attorneys and have your attorneys really sort of staying and getting close to those investigations.
Greg Rayburn is the chief restructuring officer who presided over the WorldCom scandal, the largest bankruptcy in the US at the time. When we stepped into WorldCom, we didn’t know how deep the fraud was, but we knew what we had in terms of a group of assets. We understood what the business was. We didn’t have to go and do a lot of guesswork.
With FTX, you don’t know what you have. And figuring out where the assets are could take years. I think FTX is going to be probably one of the longer cases just because of the sheer amount of litigation that’s going to be required. So far, John Ray and his team have recovered $7.3 billion in assets.
The recovery process benefiting from a rise in crypto prices. The recoveries, you know, the bankruptcy court is going to provide priorities in terms of who gets paid what out of whatever the recoveries are. When it comes to Chapter 11 bankruptcy, especially when it comes to exchanges and things like that, the chances of you getting even some or most of your money back is very low.
For now, only FTX customers in Japan have been able to withdraw any of their funds due to strict crypto regulations in the country. The company says its Japanese customers have been able to withdraw 6.6 billion yen, which is nearly 50 million dollars. For other customers, it could take much longer to get any of their money back.
I knew in one second that as soon as the bankruptcy was finalized and declared that I’m not getting access to any of this money for the next few years. I’ve resigned to the fact that I will not get all of it back. It will be a miracle, I think, if all of the money is found wherever it may be hidden or not hidden.
And while the bankruptcy process is ongoing, the value of those assets in a volatile crypto market could go up or down. I’m generally an optimist, so hopefully we can see some money back. But Sunil Kavuri is hedging his bets, joining a lawsuit with some other FTX customers, suing FTX’s celebrity endorsers in an effort to recover some of their losses.
Adam Moskowitz is his attorney. Sam knew who to go after. He was going to go after the people that most people would respect. So he went after Tom Brady, Larry David, Seth Curry, Shaquille O’Neal. We’re seeing each of the celebrities got paid millions and millions of dollars to voice this opinion that it was, quote, a safe investment and they need to be liable for that.
Attorneys for the celebrities named in the lawsuit declined our request for comment. While the bankruptcy process and other legal cases attempting to recover money from the FTX fiasco wind their way through the courts, some customers who need cash now are turning to other options. Multiple companies or individuals can actually go ahead and put in a bid for your bankruptcy claim.
The biggest question on the minds of more than a million customers and investors who lost billions on FTX. Will they ever get any of their money back? And how much of it? On FTX, I had almost 60% of my portfolio of crypto portfolio. Based on all the other bankruptcies and everything that happened in the crypto market, I was really, really worried about getting anything back and then how long I would have to wait.
I started looking at other ones like Mt. Gox, and they took almost like eight to ten years before the people even got a portion of it back. So, Bhagumshi Kanagunla goes online to see if he has any options to recover at least some of his money more quickly. I started looking into, how can I get something for these bankruptcy claims? He found a company that would help him sell his bankruptcy claim for a small percentage of its value for cash.
Here’s how it worked. The bankruptcy claim was for $174,000. The buyer was, after all the due diligence and everything, it went down to like 11% of the $174,000. And I think that came out to almost around $19,000 or so. So I got a certain percentage back. I guess the best way to say it is it’s 11 cents for the dollar.
Years later, if the bankruptcy process recovers more than 11 cents on the dollar for that claim, then the buyer of Cunnigun Law’s claim pockets the difference and turns a profit. Let’s say in like the $174,000 that I lost in FTX gets recovered in 10 years, right? I will have zero regrets. Zero regrets because Kunnigunla has a different strategy.
I wanted to get the cash from the bankruptcy claim primarily to invest in crypto again. I felt like as if there was a good chance for me to make money in the next five to 10 years. So mine is always a long term perspective. For other FTX customers, it’s a waiting game. And as time goes on, the highly specialized investigators working around the clock on the FTX bankruptcy are billing by the hour.
What’s interesting about this bankruptcy is you do have an incredible window in vivid detail as to every penny that every consultant is earning. From the $1,300 an hour that John Ray is charging to the average $1,800 an hour that Sullivan & Cromwell is charging. Seven months into the FTX bankruptcy case, the retained professionals already have requested more than 200 million in fees, according to a court-appointed fee examiner’s report. That’s nearly $1.5 million a day.
The report says the fees are remarkable, but so is the professionals’ performance. The firms named in the examiner’s report declined a request for comment. The firms named in the examiner’s report declined a request for comment. What’s really concerning is that all the lawyers have to be paid in the bankruptcy before we get paid out.
Because the number of professionals involved and the hours they work changes over time, it’s impossible to calculate how much the bankruptcy fees will ultimately cost FTX customers. The real winners in all of this will be the attorneys who worked on the bankruptcy. They’re not just the real winners.
They’re going to be the only winners. So far, none of the customers we spoke to have received any of their money back from FTX. And you may be surprised to hear that this whole experience has not shaken their faith in crypto. I think cryptocurrencies generally should be here to stay. I think that it hasn’t shaken my faith in the underlying asset itself.
I do want everybody to understand that the mistake here was not Bitcoin. The mistake here was not crypto. The mistake was one bad actor, SBF, who was really the one who was to blame for all of this. And the fundamental reason why we buy Bitcoin, why we use Bitcoin has not changed. I would encourage people to still invest in crypto. Would I encourage them the way I had before? No.
I probably would give them some different advice at this point and say, hey, you know, here’s what I learned. Don’t make the same mistakes I did. Sam Bankman-Fried has been willing to admit he’s made some mistakes as well. I made a lot of mistakes or things I would give anything to be able to do over again.
I didn’t ever try to commit fraud on anyone. Though Bankman-Fried’s version of the story is difficult for FTX customers to believe. Were you truthful with us today? I was as truthful as I’m knowledgeable to be. There’s some things I wish I knew more about, but yes, I was. Truthful or not, the question of whether Bankman-Fried broke the law is now up to the courts to decide.
Bankman-Fried’s pled not guilty to all charges. I don’t see how all of the evidence that’s now been sort of laid out there in the open against him could be construed any other way than him having committed financial crimes. We asked those impacted the most by the collapse of FTX if they have a message for Bankman-Fried.
I don’t have anything to say to Sam. Not at all. I’m disappointed in the betrayal of trust. I’m disappointed in the lack of understanding for the need for integrity. I don’t know if it would get through to him, but I believe the worst thing he has done is the suffering he has caused to millions of victims worldwide. I would sell Sam.
I mean, it’s great that at least you’re saying in the media that you want to make sure all the customers are right. I guess do the right thing then. I mean, serve your time, pay your penalties and do the best you can for your users. My biggest advice to him is figure out what you can do to help all those people who lost their life savings in FTX. I don’t know how you’re gonna do it or what you’re gonna do.
Get it done. If I had a chance to confront Sam face to face, I would just honestly be curious to know what he was actually trying to do. Were you trying to do good or were you just a really bad person and promoted yourself really well in order to swindle a bunch of people? Like, just give me an honest answer. Thank you.
